INSIDE HEALTH CARE.

Group says juries not to blame for cost surge

Insurance company business practices, not larger jury awards, are largely to blame for soaring medical malpractice premiums in Illinois, a national consumer group said in a study released Wednesday.

Americans for Insurance Reform blames everything from a sagging economy and poor stock market conditions to insurance company pricing for the spike in Illinois medical malpractice premiums.

The study runs counter to arguments by physicians and their lobbyists, who are pushing state and federal lawmakers to pass tort reform legislation that would cap certain damages as a way to curb high malpractice costs.

"Consumers should know that the cause of spikes in doctors' medical malpractice premiums has nothing to do with the legal system and [jury] payouts ... it has to do with the business practices of the insurance industry," said Joanne Doroshow, co-founder of the New York-based reform group, a coalition of more than 100 consumer groups led by the Center for Justice & Democracy.

To make its case, the coalition analyzed nearly 30 years of insurance company data from insurance rating agency A.M. Best and Co., as well as financial data from the Illinois Department of Insurance.

Medical malpractice rates are making a particularly steep jump now because rate increases had fallen below the rate of inflation for much of a 17-year period, Americans for Insurance Reform said.

Last year, malpractice insurance rates rose by 15 percent on average in Illinois, according to the state's largest carrier.

Some specialists, however, saw increases of 100 percent or more.

Yet from 1995 to 2000, Americans for Insurance Reform said, rates fell so low they became inadequate to cover malpractice claims.

Many companies collapsed or pulled out of the malpractice business, the study said.

"It is a fairly well-defined cycle that not only exists in Illinois but in every state," Doroshow said. "Insurers make most of their money from investments. In years when investments are doing well, as they were in the 1990s, there is a price war where rates are kept low."

For example, the average "paid loss" per doctor fell nearly 10 percent to $7,604 in 1999, from $8,433 in 1998. During that time, jury awards grew in size, analysts say.

Still, physicians point to analyst figures that show jury awards have doubled, to more than $1 million, in the last seven years, according to Jury Verdict Research. That trend, doctors say, contributes to higher medical malpractice premiums.

"The size of the awards are much greater and all of the data shows that," said Dr. Alfred J. Clementi, a general surgeon from Arlington Heights who is on the board of the ISMIE Mutual Insurance Co., the state's largest malpractice carrier. "We are paying out larger awards."

Yet Americans for Insurance Reform believes the answer to curbing the growth of malpractice premiums lies in increased regulation of insurers.

"There are ways of controlling these sharp ups and downs in premiums which are causing this crisis," Doroshow said. "The only way is to increase regulatory control over rates by insurance departments."